OBJ asked Oz Drewniak, president of CLV Group, for his thoughts on office-to-residential conversions and lessons learned from the work CLV has already done.
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With office-to-residential conversions in Ottawa taking centrestage, OBJ asked Oz Drewniak, president of CLV Group, for his thoughts on several aspects of the process and some lessons learned from the work he and his team at CLV have already done.
- Conversions seem like a major undertaking. What are the advantages and disadvantages of the process from an economic, social and environmental perspective?
2. What are the most important characteristics a developer needs to look for when assessing whether a building is suitable for a conversion? What makes some buildings more viable for conversions than others?
There are many characteristics that require careful consideration, including floorplate depths, exposure to windows, layout of the elevator and structural core, among other elements. Most office buildings were initially designed to have large open spaces with square central cores — this can make residential unit layouts difficult as they are too deep and have low window-to-square-footage ratios. Tenant lease tenure is also very important. It is not possible to convert half a building due to the full upgrade of plumbing, electrical and mechanical systems that is required; thus the entire building needs to be emptied prior to conversion.3. In your estimation, how would the cost of a conversion compare with demolishing an existing structure and rebuilding it from scratch?
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The total costs between converting an existing building, demolishing and rebuilding or building from raw land are all similar. Sellers of existing office buildings or of land are very sophisticated and they are often aware or advised of the cost to convert compared to the cost of new construction. The office building price or raw land price is then maximized by the seller to what the market can support, inclusive of all development costs. As such, when all related development costs are tallied at the end, there is no meaningful difference between the various approaches — only timing, environmental and social benefits.
4. CLV Group has completed a large-scale conversion of 473 Albert St. What were the biggest challenges you faced in redeveloping that property?
I would categorize the challenges into two buckets; building-related and market-related. We could literally fill this article with challenges and lessons learned. For example, building-wise, there were challenges with the elevator and structural core configuration, which required heavy modifications. The layout of existing window openings required very creative unit design layouts. There were surprises not identified on as-built drawings, which were only found during interior demolition, that added timing and costs. There were high costs for stormwater management and parkland dedication fees that added millions of dollars to the budget. As for market-related factors, we purchased 473 Albert just prior to the pandemic. This brought about a whole other set of challenges. We were faced with redesigning suites to respond to a hybrid work culture; we were faced with sudden supply chain issues, long delays and rising hard costs; we were faced with labour strikes and major infrastructure and roadwork in front of the building, all of which were out of our control and added to the timing and cost of the project. It was a tremendous learning experience for all involved.5. What were the biggest lessons you learned during that process that you plan to apply to your next conversion project at 360 Laurier?
Although Albert was a huge challenge for the reasons listed above, it taught us many lessons in due diligence, creative design and adaptability. It is ultimately important to conduct thorough due diligence and design testing prior to purchasing a building to convert. You have to ensure that you understand all the potential pitfalls that may be faced during conversion. It is also critical to have a consultant team that is adaptable to change and can think outside of the box — no matter how much due diligence you do, there will always be things uncovered during the demolition process that need to be solved in unconventional ways midway through the project. You have to go into a project like this with eyes wide open and the ability to pivot quickly.6. Typically, what are the steps a developer has to go through to make sure conversions comply with all provincial and municipal regulations? How long does the approval process take?
This can be a lengthy process, depending on how an office building is zoned. A full zoning review is an elemental step during the due diligence period of buying a building. If the zoning allows for residential as one of the uses, then the process is a full site plan application and change of use from office to residential. It becomes more challenging if the zoning needs to be changed to allow residential use. In that case, a zoning amendment would be required and potentially an Official Plan amendment followed by a full site plan process. Thereafter, the usual building permit application process is required to ensure that the construction plans conform to the local and provincial building codes. The timeline can vary depending on the approach and complexity, but it can range from eight months to a year or more. This is an area where we have seen the City of Ottawa begin to focus through a SWAT team dedicated to conversions. These conversions need expertise because each one is so unique. Although it is early in the city’s process, we are hopeful that the SWAT team can help developers through the complex planning process quickly so we can see more buildings become converted in the future. This would be good for everyone.7. What would be the No. 1 piece of advice you would give to a developer that is considering a conversion for the first time?
Due diligence! You can never do enough due diligence. And ensure you have enough contingency built in for surprises along the way, because there will be many.8. Besides 360 Laurier, are you considering any other sites for potential conversions either in Ottawa or elsewhere?
We are always looking for new opportunities and continue to review buildings on and off the market. Although we want to do more in Ottawa, we are starting to look in other markets due to incentives being offered to convert offices to residential use. For example, Calgary is providing incentives of up to $75 per square foot to developers who are converting offices to residential. This co-partnership approach between the city and developers is attracting lots of interest and has already helped Calgary convert offices into over 700 new apartments. It’s exactly the type of help we need to see here in Ottawa to spur more conversions and to support and revitalize our downtown district. It needs to be a team effort.
